Hyden, Miron & Foster, PLLC Law Blog

Thursday, July 23, 2020

What Does the Tax Cuts and Jobs Act Mean for Estate Planning?

The Tax Cuts and Jobs Act was signed into law by President Donald Trump in December of 2017. This is considered to be a major piece of tax reform and one that will have significant impacts for the foreseeable future. Some of the major provisions of the Tax Cuts and Jobs Act include increases to estate tax and gift tax exemptions to $11.18 million per person and $23.36 million per married couple in 2018. This means gifts and bequests to heirs under these amounts come without federal estate tax consequences. The generation-skipping tax (GST) was also increased by the same amount.

These provisions of the 2017 Tax Cuts and Jobs act opened the door on some valuable opportunities in estate planning. The increase in exemptions is set to expire at the end of 2025, unless Congress repeals the act or extends it, so now is the time for individuals, particularly high net worth individuals, to take advantage of the law as it currently stands. Take a look at what the Tax Cuts and Jobs Act could mean for your estate plan. Be sure to review your estate plan to help ensure that it still accomplishes what you want it to under the changes in law.

What Does the Tax Cuts and Jobs Act Mean for Estate Planning?

The sizeable increase in the federal estate tax exemption is a big opportunity for those with a net worth above the previous exemption amount. People in this position should look to strengthen their estate plans in a way that maximizes the benefits of the increase. When done properly, this means that more wealth is preserved for heirs since the federal government will not be taking a cut or as big of a cut through the estate tax.

The increase in federal exemption on the gift tax is also a prime opportunity for more effective transfer and preservation of wealth. The exemption increase allows for bigger gifts to be made tax free. This means that more assets and resources may be transferred directly to a person or transferred into a trust without gift tax consequences. This means that you should not only review your estate plan, but you should consider how your lifetime planning should change and how that will impact your estate plan.

It is important to note that, while the Tax Cuts and Jobs Act made significant changes to the federal estate tax, there was no change made under the Act to estate taxes in place at the state level. Only some states have an estate tax. Arkansas is not one of them. This does not mean, however, that this could change in the not so distant future. Some states are in the midst of some difficult financial problems. An estate tax may be seen as a way to alleviate these problems leading state legislators to enact a state estate tax when there was not one in the past.

Estate Planning Attorneys

Tax laws often have significant impacts on the most effective way to estate plan. The Tax Cuts and Jobs Act provided some big opportunities to structure or restructure estate plans in a way that maximizes the benefits of increased federal estate tax exemptions. At Hyden, Miron & Foster, our dedicated team of tax and estate planning attorneys is here to help you protect your wealth and maximize the effectiveness of your estate plan. Contact us today.

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